India Inc’s business confidence is witnessing a definite turnaround after Prime Minister Dr Manmohan Singh has assumed the charge of the Finance Ministry as well, reveals a quick survey done by the Associated Chamber of Commerce and Industry of India (ASSOCHAM) has found.
The survey, among the country’s top 150 CEOs found that the industry and investors see a renewed energy being infused into the economy, which has witnessed some tumultuous times in the last three to four months.
Over 80 per cent of the CEOs polled felt that the Prime Minister, in his role as the Finance Minister, will now act without further loss of time, as he realizes that the economy cannot afford any more indecisiveness.
They also felt that the global conditions, coupled with the perception of slow domestic policy actions had damaged the business environment, worsened by the international credit rating agencies.
Similarly, the draft guidelines on the General Anti-Avoidance Rules (GAAR), would at least give a platform for the issue to be debated threadbare. “We would urge the government not to rush in. Instead, let the stakeholders- government, tax-payers, stock market, industry and even foreign players get into informed debates, before we get an acceptable view, win-win for all. Besides, the exercise will bring in the much-needed clarity on one of the most controversial issues,” said Mr Rajkumar N Dhoot, President ASSOCHAM adding that ASSOCHAM would also hold a series of discussions on the issue.
The respondents said, while allowing foreign direct investment in multi-brand retail will not necessarily lead to flood of foreign funds, the decision will send a very positive signal among the global and domestic investors.
A clear majority in the ASSOCHAM survey, undertaken in the last few days, expect some definite actions in the areas of power sector, particularly with regard to fixing problems of fuel supply. An immediate action can be expected by taking a review of the GAAR provision and also push to the Direct Tax Code Bill (DTC) in the Monsoon session of Parliament.
Some easing of regime is also expected for the mutual fund industry, which has been marred by several problems, including those of product distribution after entry loads were done away with, the chamber said.
“We in the industry have high hopes riding on the Prime Minister, who as the country’s Finance Minister in early nineties rewrote India’s economic history by ushering in reforms,” said Mr. Dhoot.
While the contentious matter of retrospective tax laws may not get solved fast, the CEOs expect the government to reach out to the investors to explain to them the rationale behind these laws.
“As for the retroactive tax laws are concerned, once the government comes out clarifications that they are not meant for witch-hunting, we do expect the investors to get convinced. However, some way must be found so that too much discretionary power is not given to the tax officials”, the ASSOCHAM Chief said.
As many as 72 per cent of the CEOs, polled in the ASSOCHAM survey, said that the Prime Minister now has a great opportunity to set things right among the economic and infrastructure ministries like roads, power, coal and environment.
However, not many expected a major turnaround in civil aviation, the sector which is marred by large debts and near bankruptcy among some important players, it was felt.
The survey pointed out overwhelmingly that the sectors requiring urgent government and RBI attention are the real estate, housing, automobile and the banking.
“We need immediate reversal in the interest rates. Ultra high rates of interest are causing a big imbalance in the economy and killing the demand in several labour-intensive sectors. This has a huge implication for the employment,” added Mr. Dhoot.
According to the broad findings of the survey, the initial few moves in the Finance Ministry, supported by the Planning Commission Deputy Chairman Montek Singh Ahluwalia, send a clear signal of course correction, which is urgently required.